This bill introduces several revisions to the laws governing trusts in South Dakota. A new section is added to chapter 55-1, allowing trustees to reimburse trustors for personal income tax liabilities under specific conditions, provided the governing instrument does not prohibit such reimbursements. It also clarifies that the cash value of life insurance policies held in trust cannot be used for these reimbursements. Additionally, the bill establishes that the power to make such payments does not classify the trustor as a beneficiary for certain legal purposes, and it ensures that these provisions do not affect marital or charitable deductions for tax purposes. The new rules apply only to trusts created or administered in South Dakota after July 1, 2026.

Further amendments include changes to the rules regarding the appointment of trustees and the treatment of distributions from trusts. The bill specifies that distributions from revocable and irrevocable trusts are not considered advancements against a beneficiary's share unless explicitly stated in writing. It also clarifies the attorney-client relationship between fiduciaries and attorneys, ensuring that such relationships do not impose additional obligations on attorneys to other interested parties. Other sections address the treatment of fraudulent transfers and the classification of community property within special spousal trusts, reinforcing the legal framework surrounding trust management and beneficiary rights.

Statutes affected:
Introduced, 01/19/2026: 55-2-15, 55-4-33, 55-16-10, 55-17-5
Enrolled, 03/01/2026: 55-2-15, 55-4-33, 55-16-10, 55-17-5